In a concerning development, China witnessed a decline in exports during May, marking the first decrease since February. This has raised worries about the potential slowdown in the world’s second-largest economy’s growth.
According to customs data released on Wednesday, exports fell by 7.5% year-on-year to $283.5 billion, a far worse outcome than the 0.4% decline predicted in a Reuters poll. Julian Evans-Pritchard, the head of China Economics at Capital Economics, highlighted that the decline was so significant that export volumes dropped below their levels at the beginning of the year, even after accounting for seasonality and changes in export prices. This suggests subdued global demand for Chinese goods.
Although China’s exports exceeded expectations in April with a year-on-year growth of 8.5%, the disappointing figures for May indicate a downward trend in the longer term, according to Hao Hong, chief economist at Grow Investment Group. He mentioned that China won’t be able to rely on trade to boost its economy for at least another six months due to lackluster U.S. demand, high inflation rates, and interest rates.
Customs data revealed a sharp decline in the dollar value of China’s exports to the U.S., which plummeted by 15.1% in May compared to the previous year. Exports to the European Union also saw a decline of 4.9%. However, China’s exports to the Association of Southeast Asian Nations (ASEAN) increased by 8.1% in dollar terms during the same period.
On the other hand, imports for May recorded a smaller drop than expected, falling by 4.5% from the previous year to $217.69 billion, compared to the projected 8% decline. China has witnessed year-on-year declines in monthly imports since late last year. There were indications of recovery in domestic demand, with import volumes in May reaching an 18-month high, accounting for a lower comparison base and price changes, as estimated by Evans-Pritchard from Capital Economics.
China is scheduled to release inflation data on Friday, which will provide further insights into the country’s economic situation.